Norton on Real Estate: Buckle up — The recession is officially here

With the ice storm as the final blow, 2008 closed out on many sour notes. With the economic slowdown/meltdown, now officially described as a recession, how much resiliency is left in our regional economy? The only good news is gas prices. If gas were still $4 or more, we would really be in a pickle.

It is clear we are far from being out of the economic woods. Unemployment rates are jumping and are forecast to go even higher by mid-2009. The Fed is dropping interest rates and printing money. Four-month Treasury bills went to 0 percent in mid-December. That simply cannot be a good thing.

All of the economic stimulus is confusing. But will it be enough? Should we bail out the car companies or let them go into Chapter 11? I am glad that I am not being sworn into office on Jan. 20! What a mess. There are so many pieces and variables it is simply impossible to grasp it all.

Clearly we need to deleverage. The consumer, businesses and governments at all levels have loaded up on debt, and now the pigeons are coming home to roost. How long will this correction take? My guess is at least two years. In fact, if we bounce out of this recession sooner, I believe it will be a false positive — we will not have changed our thinking and behaviors, and thus we are likely to slide back into the spend-spend mind set, largely because the alternatives are difficult and challenging.

Enough moralizing. We, as a nation, are overextended. We need to get our financial house in order. But at the same time as we tackle the immediate issues, right over our shoulders is Medicare, Social Security, worn-out infrastructures and a national debt on steroids. While all, or nearly all, agree we have to spend (borrow) our way out of this recession, at some point that debt is going to come due. After all, for every action there is an equal and opposite reaction. Or in economic terms, for every benefit there is a cost.

You do not need me to recite the litany of bad news. While we make our living in the commercial real estate arena, it is the core business principles that are being stressed right now. I am asking my clients about their receivables, new orders, sales numbers vs. projections and budget. These are the metrics that change the demand for space. If/when unemployment goes to 7 percent or 8 percent there will be less demand for space.

With so much doom and gloom in all forms of the media, no one is signing new leases or even renewing existing ones, except very reluctantly and for the shortest terms possible.

The executive suites are simply having a tough time figuring where business will be in 2009 and 2010. What is lacking is confidence. Everyone is looking to one fellow whose initials are B.O. and hoping he has the fortitude of F.D.R. He strikes me as a smart man, and so far his cabinet and senior management picks are impressive.

The point is, until the Obama administration serves its first 100 days, we will not have a sense of how long this recession is likely to last. So enjoy the holidays as best you can, buckle your seat belts and expect continued turbulence as we try to fire up this economic engine and get it rolling down the tracks in 2009.

Bill Norton, president of Norton Asset Management, is a Counselor of Real Estate (CRE) and a Fellow of the Royal Institution of Chartered Surveyors (FRICS). He can be reached at